In: Finance
please show work on Question 3
2. The following table shows stock prices (May 1, 2017, closing), EPS 2016 actual, 2017 forecast, 2018 forecast, and 2016 dividend for the three chemical companies. | |||||
Stock Price | EPS, 2016 Actual | EPS, 2017 | EPS, 2018 | Dividend | |
DuPont | 79.49 | 2.77 | 3.84 | 4.09 | 1.52 |
Dow | 62.52 | 3.52 | 4.07 | 4.41 | 1.84 |
PPG | 109.46 | 5.82 | 6.26 | 6.92 | 1.56 |
Given the information above, calculate PE for the three definitions of EPS, dividend yield, and dividend payout. | |||||
Price/Actual EPS | Price/2017 EPS | Price/2018 EPS | Dividend Yield | Dividend Payout | |
DuPont | 28.70 | 20.70 | 19.44 | 1.91% | 54.87% |
Dow | 17.76 | 15.36 | 14.18 | 2.94% | 52.27% |
PPG | 18.81 | 17.49 | 15.82 | 1.43% | 26.80% |
3. The following table shows historical and projected annual earnings growth rates. | |||||
5-Year Historic Earnings Growth Rates | 5-Year Projected Earnings Growth Rates | ||||
DuPont | -2.43% | 8.06% | |||
Dow | 17.39% | 6.96% | |||
PPG | 10.36% | 9.54% | |||
Calculate PE to earnings growth rates (PEG), using the information above and calculations from Question 2. | |||||
Current PE / 5-Yr Historic Growth | 1-Yr Ahead PE Forecast / 5-Yr Projected Growth | 2-Yr-Ahead PE Forecast / 5-Yr Projected Growth | |||
DuPont | -3.32 | ||||
Dow | 0.40 | ||||
PPG | 0.92 |
Current PE / 5-Yr Historic Growth | 1-Yr Ahead PE Forecast / 5-Yr Projected Growth | 2-Yr-Ahead PE Forecast / 5-Yr Projected Growth | |||
DuPont | -3.32 | 2.57 | 2.41 | ||
Dow | 0.4 | 2.21 | 2.04 | ||
PPG | 0.92 | 1.83 | 1.66 | ||
Formula for PEG = PE ratio/Earnings growth rate |